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On May 14, 2018, the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA.) This act had prohibited US citizens from engaging in sports betting in all but one state: Nevada. Since the act was repealed, the options for sportsbetting across the country have exploded.
One such state that is taking advantage of these new laws is Wyoming. This September saw the launch of online betting in Wyoming with BetMGM Sportsbook and DraftKings Sportsbook. According to the Wyoming Pari-Mutuel Commission, $6.2m was placed between each sportsbook in the first month.
The addition of Wyoming brings the number of states with legal betting up to 26. Additionally, sportsbetting is legal in Washington DC.
For most states, this is a welcome addition. For starters, the taxable revenue provides a boost. Secondly, the PASPA forced betting underground, leaving unregulated entities and organized crime to benefit.
However, perhaps the most intriguing aspect of Wyoming’s move into sportsbetting is that the legislation permits the use of cryptocurrency. Specifically, House bill 133 allows deposits in the form of crypto, digital, or virtual currencies, as long as they can be converted into cash currencies.
The inclusion of crypto-friendly wording in the bill is part of Wyoming’s longer-term courting of crypto businesses to the state. And while allowing digital currency deposits is a fair way from allowing residents to bet in crypto, it does signify the state's willingness to experiment with blockchain and virtual currency. In short, it could be the start of something far more significant in the future.
Sportsbetting is a huge growth market in the US. Grand View Research suggests that the industry will have a compound annual growth rate (CAGR) of 10%, leading to an overall value of $140bn by 2028. If all states pass legislation that allows sportsbetting, this could lead to a significant increase in tax and employment.
Blockchain and other decentralized finance (DeFi) applications have had a significant impact on the financial markets. This emerging technology could allow faster, safer deposits and withdrawals. Additionally, it could save costs on credit card processing fees.
One other exciting possibility is that this technology could reduce operating costs significantly. Sportsbetting lines have to include a “vig,” in the form of a fee charged by the bookmaker. Reduced operating costs could make these lines more attractive, which would mitigate losses incurred by some bettors.
Currently, each sportsbook essentially serves as an intermediary between bettors. They set lines or odds that are adjusted based on money placed on a specific outcome. So, if there is a boxing match and Boxer A is being bet on heavily, this will cause their odds to shorten to make betting on Boxer B more attractive.
In other ways, a crypto-based sportsbook could work precisely the same by offering adjustable odds on the outcomes of various sports and taking a percentage of the winnings. American sportsbooks have already embraced relationships with third-party vendors that support data, geo-fencing, casino software, and more. If crypto-based solutions provide a way to generate revenue, they could be next.
For example, sportsbooks could partner with crypto exchanges to develop platforms that facilitate sports betting on the exchange or via the betting platform itself. Tightly aligned relationships like this could allow the bettor to both speculate on the currency market and make wagers with other account holders via crypto.
DraftKings, mentioned above, announced a relationship with sports collectibles specialists Autograph. This partnership will allow DraftKings members to trade autographs in the form of non-fungible tokens (NFTs), among other crypto-based items.
Gambling has often been a magnet for shady dealings and corruption. As a result, many people who would like to bet on sports are very sceptical of dealing with sportsbooks. However, blockchain offers a “trustless” alternative that could prove very appealing to your average sports better.
Blockchain’s system of shared ledgers could ensure that no foul play or cheating occurs on the platform, meaning players could feel their money is safe and secure.
As mentioned above, the blockchain has a system of ledgers that work something like a shared database. There needs to be a majority consensus that each new addition to the block is valid. When viewed from a sportsbetting context, this could help ensure that dishonest parties don’t scam bettors.
For example, a player sees some favorable odds and takes them. The sportsbooks realize they’ve made a mistake and try to edit the bet. To do this, they’ll need to alter the block. However, each new block in the chain also features the hash from the previous block. This means those dishonest actors will need to keep editing and altering blocks to cover their errors. The cost of this duplicity is far more than any money that would be lost from the original mistake, meaning dishonest actors are not incentivized to try and pull these kinds of tricks.
A considerable advantage of a decentralized betting platform is the possibility to settle bets instantly. Currently, betting platforms can take several days to facilitate withdrawals. Additionally, blockchain-based betting should eliminate human errors.
While these errors aren’t a significant issue for most sportsbooks, bets via smart contracts could be largely automated, meaning no mistakes and less time spent by customer services dealing with the fall out of this issue.
While Wyoming represents a small step on the road towards tighter alignment between the sportsbetting industry and cryptocurrency, it is not insignificant. Gen Z and Millennials are far more comfortable with alternative, internet-based financial services. With the PASPA restrictions being removed by more than half the American states already, great opportunities are opening up.
Faster payments, increased security, and the potential of more innovative products mean that cryptocurrency and blockchain will be part of this new sportsbetting future.
